How should we pay for our Care?
How should we pay for our Care? When someone needs long-term care, it is emotional with feelings of guilt and fear. People are faced with baffling terminology and a care system they are very unfamiliar with and few understand. And so people don’t know how to deal with it or where to go for help and assistance when making a very important decision. As people are living longer as we are healthier, but eventually there comes a time when some of us will need support and care. Residential care costs in a good home can range between £900 and £1,000 a week in London and the South-East, and between £600-£700 a week in other parts of the UK. The differences are due to higher wages and property costs. Overall, people don’t generally think about getting older. But it will always happen and so the more you put aside to save for a rainy day the better in the future. So how should we pay for our care? Here is some guidance that people need: Based on this and the ongoing, hard to navigate maze of social care funding, we answer some of the key questions on how care is structured, who pays for what, and where older people and their families can get the advice they REALLY need.
WHO WILL OR MAY NEED IT? About 20% of men and 33% of women aged 65 today will need to enter a care home in the future. Others will need care and help with everyday living in their own homes. WHAT ABOUT THE COSTS? Local authorities are responsible for assessing your care needs. Costs will depend on where you live and what your exact needs are. HOW IS CARE FUNDED? The NHS will only pay in full for those with the most serious medical conditions. Those with some nursing needs may get a tax-free nursing care allowance worth up to £108.70 a week, depending on where they live. Additionally, some older people can also claim Attendance Allowance if they have a long-term need for assistance with basic tasks of living. This benefit is worth up to £73.60 a week and is open to all regardless of their wealth. Beyond any NHS support, care – whether in your own home or in a residential /care home – is subject to a means test by the local authority. Only those with assets below a threshold qualify for State help. The rest have to pay the remainder of the care costs themselves. Your home is excluded from the means test for as long as you or a dependent elderly relative lives there. But 12 weeks after this no longer applies, for example because a spouse living there dies, the local authority will count the value of a home as your assets. WHAT ARE THE MEANS-TEST THRESHOLDS? In England and Northern Ireland, State help starts once your assets fall below £23,250 and care is funded in full once they are less than £14,250. In Scotland, the figures are £23,500 and £14,500. In Wales, there is a single threshold of £22,500. Once your wealth dips below this, care is funded in full. In Scotland, there are additional payments of £159 a week for everyone in care homes for personal care. CAN YOU PREPARE FOR THIS IN ADVANCE? Yes, but few actually do. As that is actually one of the problems as people don’t always plan for their old age. SO HOW CAN YOU PAY FOR YOUR CARE? It is rare for income from pensions and any benefits that can be claimed to fully cover care fees. A typical client faces a £25,000 to £30,000 annual shortfall for a Care Home. So in many cases the only way to fund care will be through the sale of a home. The key for older people and their families is how to use this money wisely to ensure there is enough to cover your fees whilst in the care home. One option is to buy a care annuity, which involves handing over a lump sum to an insurer in exchange for a set income for the rest of your life. Each annuity is underwritten on the basis of a medical questionnaire and the rate reflects the health of the person in care. The worse your health, the less an insurer will charge per £100 of lifetime income. Provided that the annuity is paid direct to the care home, all income this produces is tax-free. You should get a quote for an immediate care annuity as a matter of course. This will give you an idea of what a person’s life expectancy while in care might be and allow you and an adviser to have a proper discussion around all the options. HOW CAN OR WILL AN ANNUITY HELP? For example if your care home fees cost £850 a week and your pension/s and any benefits such as the Attendance Allowance will cover some of this, you will probably find that there is still a difference/gap to fill. So if you have to sell a property to provide money for the care fees. It is best to have a plan in place on how best to manage these fees in the future. Based on this need, an annuity is sometimes suggested to cover the gap. This means that the initial investment into the care annuity will pay out a yearly sum to the care home to cover the fees. WHAT ARE MY OTHER OPTIONS? You could invest the proceeds of the property sale in the hope the income produced plus a gradual drawdown of the capital will cover fees. If so, it is sensible to assume that care fees will increase by 5-6%per cent each year and that these sort of investments will only currently return a 3% income. Which in the medium to long term will result in a shortfall. WHERE CAN I GO FOR HELP? Fewer than one in ten of those who pay for their care have had any specialist advice. And only a handful of local authorities point families in the direction of independent advice. HOW MIGHT THINGS CHANGE? The Government set up a Commission on funding care to look at longterm reforms. It reported in the summer, calling for a £35,000 cap on the amount anyone should be asked to pay towards care. On top of this, those in a home would have to pay the ‘hotel’ costs of their accommodation, capped at between £7,000 and £10,000 a year. Finally, the means-test threshold would be increased to £100,000. The Government is considering the proposals and is expected to respond with a White Paper next year, though any change would not come into effect until 2014 at the earliest. Anyone wanting advice should contact The Society of Later Life Advisers, who will give you details of other qualified advisers.